Continent of promise and peril
With deep inefficiencies and illiquid shares, Africa requires a longer-term commitment than most other markets
Financial advisers and pension fund trustees should reconsider their exposure to countries elsewhere in Africa now that pension fund members may increase their maximum allocation to this region to 10%.
With a range of highly inefficient markets and illiquid shares to choose from, there is still a strong case for active management of African frontier funds.
And 2017 was a particularly strong year for the continent. The Laurium Limpopo African Equity Fund, for example, provided a 48% return. Markets were coming off a low base, with a devaluation of about 50% in the Egyptian pound and the Nigerian naira in 2016.
“The positive trend continued in the first quarter of 2018,” says Laurium fund manager Paul Robinson, “but it turned negative again in May as investors sold out of emerging and frontier markets.”
He says the demands on MTN for extra tax payments by the Central Bank of Nigeria did not help: MTN Nigeria was the most keenly expected IPO of the year and it has been postponed indefinitely.
But Egypt has a strong IPO pipeline. Recently listed Obour Land is a favourite of most fund managers as it produces spreadable feta cheese, the staple source of protein in the mass market. And Cira, a property developer in Egypt that builds and manages schools — a hybrid of Balwin Properties and Advtech — has added another option to the universe.
Fungai Tarirah, manager of the Sandtonbased Rudiarius BCI Africa Equity Fund, says many African countries have put the right reforms in place. Egypt has dropped all subsidies except for butane — the main fuel used by the poor — and Kenya has built a single-gauge railway from Nairobi to the sea with Chinese
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